Hefty charge weighs on Merck

Drug maker issues lowered 2011 financial forecast

ValBrickates Kennedy

BOSTON (MarketWatch) — Merck & Co. on Thursday said it swung to a loss, as the pharmaceuticals heavyweight absorbed a hefty charge related to a troubled drug-development program.

Merck
MRK, +0.54%
which merged with rival Schering-Plough in late 2009, also issued a 2011 financial forecast that fell short of many Wall Street estimates.

Shares of Merck were down almost 3% at $32.87 in midday trading.

Whitehouse Station, N.J.-based Merck posted a net loss of $531 million, or 17 cents a share, vs. a profit of $6.49 billion, or $2.35 a share, for the same period in 2009.

Merck took a $1.7 billion pre-tax charge related to its research program for the blood-thinner vorapaxar.

The 2009 quarter was boosted by a $7.5 billion gain related to a previous partnership with the former Schering-Plough. Last year’s quarter also contained a $1.5 billion merger-related restructuring charge.

Excluding various items, Merck would have reported earnings of 88 cents a share vs. 79 cents in the year-ago period.

Revenue rose to $12.1 billion from $10.1 billion, reflecting the inclusion of Schering-Plough legacy products. Merck merged with Schering-Plough in November 2009, in a deal valued around $49 billion.

A poll by analysts had forecast that Merck would earn 83 cents a share, on revenue of $11.55 billion.

The company also issued a mixed 2011 financial outlook.

Merck said that it now sees 2011 adjusted earnings of between $3.64 and $3.76 a share. Revenue is expected to grow in the low to mid-single digits from a base of $46 billion. Analysts were expecting earnings of $3.81 a share, with revenue of $45.14 billion.

Merck also said it was withdrawing its longer-term financial outlook.

“Given industry pressures such as greater E.U. austerity measures and the additional impact of U.S. health care reform, as well as developments in its vorapaxar clinical program, the company has withdrawn its previous long-term target of high single-digit non-GAAP EPS compound annual growth rate from 2009 to 2013,” Merck said in a statement.

Last month, shares of Merck were dented when the company announced it was shutting down a Phase III clinical study and modifying a second for its experimental blood-thinner vorapaxar due to safety concerns.

In late November, Merck named Kenneth Frazier, its general counsel, to succeed Richard Clark as chief executive on Jan. 1. Clark, who reaches Merck’s mandatory retirement age later this year, will remain as chairman.

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